2025 Industrial Outlook
We took the time to ask our CRE professionals their thoughts on the upcoming year in addition to their reflections from 2024.
Reflect back on 2024. What were some highs and lows from this year? What is the biggest opportunity you see ahead in the coming year? How will you capture that opportunity?
"2024 was a year of incredible transaction activity at BKM, as the team executed on $1.3B of acquisitions consisting of 26 assets and 5.2M Sq. ft. The entire organization worked together closely and was able to quickly overcome any obstacles in the process. As we look forward to continued growth in 2025 we will be able to leverage our learnings in 2024 to execute even more seamlessly in the year ahead.
We will capture the opportunity through the continued refinement of existing processes, the development of new processes, and our organizational focus on transparency, collaboration, and communication.
Additional areas of focus in 2025 will include the continued focus on refining existing processes and leveraging technology to amplify productivity and transparency for internal and external stakeholders."
-Craig Morrow, Senior Director of Property Management
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"Highs: We are seeing pricing stabilize on construction costs, and contractors/vendors seem to be hungrier for work which has helped further stabilize pricing.
Lows: Municipalities often face challenges in the permitting process due to limited staffing and thorough reviews of plans, which can sometimes lead to delays. Additionally, many cities are increasingly prioritizing ESG initiatives, with examples such as Green Roof requirements in Denver, reflectivity standards for paint in Tempe, and restrictions on evaporative coolers in Las Vegas.
Growth and expansion are major opportunities for BKM In the upcoming year. We are structured to capitalize on the capital infusion we anticipate in 2025, which is made possible by our robust platform. We are also looking at expanding into several new regions and I’m excited to bring that platform to those markets. We provide a service to our investors and tenants that I believe benefits the markets we operate in and will continue to do so as we expand into new markets."
-C.E. Kaiser, Director, Construction Management and Business Systems
What concerns do you see over the horizon due to factors such as the economy, interest rates, inflation, a recession, supply chain issues, softening fundamentals, securing financing?
"Economic concerns, such as the continued increase in leveraged loan defaults, could negatively impact the real estate market in 2025. As certain small and medium-sized companies rely on leveraged loans for operations, growth, and acquisitions, rising defaults in the sector could lead to increased vacancy rates. However, given BKM’s diversified tenant base, coupled with our focus on key infill markets with continued strong demand of last-mile logistics and localized production, we are extremely well positioned to navigate these challenges moving forward."
-Mike Valdes, Managing Director, Finance and Accounting
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"The Federal Reserve has continued to maintain a hawkish stance to combat inflation and curb economic overheating. As of December 2024, the most recent data indicates that the U.S. annual inflation rate was 2.7% for the 12 months ending in November 2024, up from 2.6% in October. Given the Fed's 2% target, interest rates are likely to remain elevated, although the pace of hikes may slow or stabilize over the coming quarters. While these economic headwinds are likely to persist, I believe these conditions will continue to support investment in the multi-tenant light industrial sector, and BKM as the best-in-class operator in the space."
-Craig Morrow, Senior Director of Property Management
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"As we look ahead, several macroeconomic concerns remain top of mind, including elevated interest rates, inflationary pressures, and the potential for a softening economy. These factors could lead to tighter financing conditions, slower transaction volumes, and increased competition for quality assets. To counterbalance these risks, BKM will remain focused on maintaining strong tenant retention, operational efficiencies, and conservative debt strategies, ensuring we are well-positioned to weather economic volatility."
-Emily Pollard, Senior Director, Marketing and Communications
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"The potential bogey on the horizon is how the new administration's policies will impact the economy. It’s a bit of a holding pattern until we find out if they will have a strong positive, negative, or no impact."
-C.E. Kaiser, Director, Construction Management and Business Systems
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"Markets react to perception and I’m opportunistic that 2025 will be another good year in our sector. I see an increase in inflation as a result of lower interest rates but continued supply constraints. There will be supply chain issues and most likely an increase in onshoring if the new presidential policy keeps it’s tariff promises. Manufacturing, especially high-tech manufacturing, continues to benefit our product type for the businesses that support the larger manufacturers. Entrepreneurs will continue to thrive if the economy continues to thrive. Unless quantitative easing occurs at the federal level, cost of capital will continue to remain high if not increase."
-Dan King, Associate Director, Asset Management
What strategy do you think will best navigate through 2025 and what adjustments need to be made to do so? What will BKM’s approach likely be (i.e. buy/sell/hold, develop, expand/contract, refinance, recapitalize, etc.)?
"With continued uncertainty and expected volatility in the 2025 real estate market (driven by macroeconomic pressures, potential policy changes and evolving market dynamics), BKM can continue to capitalize on compelling purchase opportunities because of pricing dislocations, distressed sellers, and favorable market dynamics. Like 2024, I expect BKM to have one of its most significant capital deployment years in 2025." -Mike Valdes, Managing Director, Finance and Accounting
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"BKM’s approach for 2025 will emphasize flexibility and precision, blending acquisition and selective disposition strategies. We see opportunities to grow in supply-constrained markets where tenant demand for light industrial space remains resilient. By aligning our strategy with disciplined underwriting and localized management, we aim to mitigate risks and drive sustainable growth, even in an unpredictable market."
-Emily Pollard, Senior Director, Marketing and Communications
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"Although some markets have cooled somewhat from the feverpitch we have been experiencing, the small bay industrial space we operate in still has incredibly strong fundamentals. Without an unpredictable outside force throwing that askew we should continue to see strong growth and we will continue to buy into that growth as we find value in acquisitions. 2024 was a big year in acquisitions and dispositions, and 2025 will be yet another heavy acquisition year."
-C.E. Kaiser, Director, Construction Management and Business Systems
What markets are expected to be in growth mode and which ones are likely to be less appealing for investors? Which types are more appealing to investors and why, i.e. major markets, gateway cities, urban cores, suburban, others?
"Small bay industrial properties will remain a standout performer. Rental rates for these spaces are expected to continue rising, making them attractive investment opportunities, especially given their low vacancy rates compared to many other sectors. Additionally, owners have opportunities to attract high-quality, creditworthy tenants through innovative approaches to tenant improvements and competitive rent structures."
-Emily Pollard, Senior Director, Marketing and Communications
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"There will be market volatility in the stock and bonds markets and capital will look for safe alternatives that generate returns. This will push more competition into our space, especially as firms in other struggling real estate sectors such as office and multifamily look to enter the light industrial market. What appeals to investors is solely based on their risk tolerance. There will be more opportunities in the tertiary markets as capital favors core markets."
-Dan King, Associate Director, Asset Management
What are your goals for BKM in 2025? What would you like to see accomplished?
"Our finance team will be focused on scalability in 2025. With significant growth on BKM’s horizon, our team will continue to optimize, while strengthening internal controls. We are focused on identifying ways to automate processes and enhance the use of data analytics tools. Our goal is to reduce manual tasks and generate reliable data. This, in turn, enables easier and faster strategic decision-making."
-Mike Valdes, Managing Director, Finance and Accounting
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"BKM’s acquisition activities will increase significantly during 2025 as the relationships we developed in 2024 provide us with more opportunities to acquire properties and portfolios of properties. As we grow the platform and expand into additional markets, it is critical that we continue to hire quality talent, leverage technology, and refine processes such that we are capable of delivering a consistent “experience” for our employees, our customers, and our investors, setting BKM apart from its competitors in the marketplace."
-Craig Morrow, Senior Director of Property Management
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"In 2025, growth is top of mind and remains our focus. BKM aims to deepen its market presence in the states we currently operate in while strategically growing our geographic reach and maintaining operational excellence. Another critical goal is to strengthen investor relations and client engagement, building on the momentum from 2024’s success. By the end of the year, BKM would like to see continued growth in assets under management, enhanced brand recognition in the industry, and meaningful progress in fostering a positive, inclusive workplace culture that supports its mission and values."
-Emily Pollard, Senior Director, Marketing and Communications
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"My goals for 2025 include quickly leasing vacant suites and proactively renewing existing tenants. I plan to implement a tenant survey to assess their space needs, helping to identify potential renewals, expansions, contract adjustments, and upcoming vacancies in advance. Staying agile and responsive to market changes will be a priority. Ultimately, I aim to exceed business plan expectations in 2025."
-Dan King, Associate Director, Asset Management
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